Economic data doesn't weaken kiwi

THE New Zealand dollar has held gains after a business confidence survey and building data didn't derail the prospects for the local economic recovery.

The kiwi traded at 85.59 US cents at 5pm in Wellington from 85.65 cents at 8am, up from 85.20 cents on Monday. The trade-weighted index advanced to 78.75 from 78.47.

New Zealand business confidence edged down last month, with a net 32 per cent of firms expecting better conditions in the coming year, led by the construction sector, according to the ANZ Business Outlook.

Government figures showed a 9.1 per cent fall in seasonally adjusted building permits in March due to a slump in the volatile apartments component, though Canterbury consents rose to a new record.

The business confidence survey "shows everything going alright" while the "building permits were not as bad when you look behind the data," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.

Traders are preparing for the Federal Open Market Committee and European Central Bank monetary policy reviews later this week, with the European decision seen as the bigger risk to market sentiment in increasing volatility.

"If volatility starts to pick up and we see bigger movements, the kiwi could pull back a little bit," Mr Tennent-Brown said.

The kiwi rose to 65.35 euro cents from 65.27 cents on Monday, and to 83.85 yen from 83.21 yen.